RISK ASSESSMENT

High growth propelled by investments in the mining sector and in infrastructures

Growth remains strong, buoyed by the dynamism of the mining, agriculture and services sectors. Copper production, the country’s leading resource and accounting for 20% of GDP, should continue at a high level given the start-up of new mines and despite the almost 26% collapse in copper prices in a year in September 2015. The fall in commodity prices, in particular those of copper, have so far only had a limited impact on mining investment and output, with prices below break-even point. Output of gold doubled in 2015, whilst that of oil was down slightly. Agriculture, which accounts for 21% of GDP, should continue to sustain activity thanks to good seed, wood and wheat harvests. In addition, the services sector is expanding and being bolstered by telecommunications, retail sales and transport. Consumption will remain strong in 2016. A growing working age population and rising per capita income is fostering the emergence of a middle class avid for consumer goods. Consumption is also likely to be boosted by low inflation and interest rates. Inflation has stalled at a low level since 2013, mainly due to budgetary discipline and a stable exchange rate. This trend is likely to continue in 2016, bearing in mind the low levels of imported inflation.

Public debt remains sustainable, with a small balance of trade surplus

The budget should remain in surplus in 2016. The expected rise in election and capital goods spending should be offset by higher tax receipts, although these are vulnerable to commodity prices, and an upswing in donations. There is however a tendency for VAT revenues to decrease as a result of the inadequacies of the tax system.
In this context, public debt, much reduced thanks to debt relief by its international creditors in 2010, remains sustainable.Despite the growth in exports of mining products and the increase in current account transfers, the current account deficit remains substantial. The foreign trade surplus should endure thanks to the start of production at new copper and gold mines. This however will not offset the high level of the deficit in services and revenues generated by the repatriation of profits by foreign owned companies.

Fragile security situation and poor performance in terms of governance

In geopolitical terms, the country has emerged from several decades of armed conflict with an improved security situation following the defeat of the rebel M23 movement in 2013. The situation remains fragile with the residual activities of armed groups in the east of the country and tense relations with Rwanda and Uganda. On top of this there is growing uncertainty in the internal political situation mainly because of the danger of delays to the elections or changes to the constitution that would allow President Kabila to stand for a third term of office in November 2016. Finally, despite some improvements in regulatory quality and control of corruption, the RDC continues to score very poorly in terms of governance.